Key Points
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Summer is often a slow time on Wall Street, as investors take time off for family and vacations.
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If you are planning some summer fun, here’s a simple formula for generating dividends that requires little attention.
In reality, there’s nothing particularly special about summer. Sure, the weather is nicer, and kids are out of school, but the business world keeps chugging forward just the same. Still, people generally take the seasonal opportunity to vacation and spend more time with friends and family. If that’s what you expect this summer season, perhaps hosting the grandkids for a few weeks, then here’s an easy way to set your retirement income plan on autopilot.
Let someone else do all the work
Managing a portfolio of dividend stocks isn’t easy. Aside from deciding which stocks to buy, you have to monitor your investments throughout the year, summer included. Another option is to hand that work off to someone else. That’s easier than ever today, thanks to the creation of exchange-traded funds (ETFs). They are relatively low-cost, and there are a host of options focused specifically on generating passive income.
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One of the most popular options is Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). It uses a fairly complex screening approach to select high-quality companies with growing businesses, large dividend yields, and rising dividends. Notably, the very first screen is to pick only from the list of stocks that have increased their dividends for 10 consecutive years, which is something many dividend investors do as well. After that, it selects the 100 companies it likes best by creating a composite score that factors in leverage, return on equity, yield, and dividend history. The ETF’s dividend yield is roughly 3.3%, which is three times that of Vanguard S&P 500 ETF (NYSEMKT: VOO).
You could pair Schwab U.S. Dividend Equity ETF with Amplify CWP Enhanced Dividend Income ETF (NYSEMKT: DIVO). This ETF is actively managed, focusing on high-quality dividend stocks. Typically, the portfolio contains around 30 stocks. Management then strategically writes covered calls on a portion of the portfolio to generate extra income. The yield is 5%, but the option strategy can make the monthly dividend payment fairly volatile. That said, market volatility can increase the opportunity for writing covered calls, which can provide downside protection in falling markets. Adding Amplify CWP Enhanced Dividend Income ETF can boost your income and help you sleep well at night.
Enjoy your summer with these dividend ETFs
The world will keep spinning this summer, but you shouldn’t let that stop you from enjoying it. Step back, play with the grandkids. But don’t forget to plan ahead with well-structured dividend ETFs like Schwab U.S. Dividend Equity ETF and Amplify CWP Enhanced Dividend Income ETF. They’ll keep you invested, generating retirement income, and give you the peace of mind you need to let go for a few months.
The $23,760 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Join Stock Advisor to learn more about these strategies.
Reuben Gregg Brewer has positions in Amplify ETF Trust-Amplify Cwp Enhanced Dividend Income ETF and Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
